What motivates an angel investor to invest?

Description

Sonja Hoel Perkins, Founder of Broadway Angels explains the motivations of an angel investor to invest in startup entrepreneurs.

Video transcript:

What are the motivations of an angel investor to invest?

The angel personality is someone who loves entrepreneurship. They love new technology, they love new markets. They are passionate about things that are changing the world and that have the potential to change the world. They have time and money, probably more than people who don’t invest. They are willing to invest their time and advice and help, typically not on a board level but on an advisory level, as a trusted friend. They are willing to take risks on people. They are willing to give someone a chance.

For me at Broadway Angels and the Perkins Fund, 50% of my entrepreneurs are women. The industry average for venture funding that goes to women only 2 to 3 percent of the dollars goes to women. For me as an angel investor, I’m willing to take risks on women that most venture capitalists are not willing to. I can do that and that could be part of my passion.

Also, I have some really great companies in my angel portfolio like the RealReal, Hint Water, Rocksbox, UrbanSitter, and Ellevest which were all founded by women and so you can take risks like that.

Angel investors are investing, one is because they want to make a return but two they want to help change the world. If there is a chance that a company can change the world even though the odds are against that company, they would be willing to take it. When you look at our US economy, people say angel investing and venture capital overall returns are under 10% for everybody in the angel world and everybody in the venture-capital firms if you lump it all together. It sounds like that’s a terrible investment why would you do that?

When you think about it every single major US technology company was angel funded. We wouldn’t have had Salesforce, Microsoft, Google, Facebook, we wouldn’t have had all these incredible companies without angels and so when you think about the healthy ecosystem of the United States where you have these companies getting funded, some of them succeed and then they go public, and they become this great resource for American jobs.

So even if you lose sometimes you win with angel investing and that’s why people do it. They do it because they are passionate about it. I’ve been very lucky because I been able to pick some really good entrepreneurs and having just a lot of fun.